EOFY, which stands for End of Financial Year in Australia, marks the close of the financial year. The financial year in Australia runs from July 1 to June 30 of the following year. So the EOFY signifies the closing date for the financial aspects of an individual’s income, an organisation’s revenue, SMSFs, and taxes.
At this point, the accountants and finance teams will be super busy, and simultaneously, the ATO will start its review, verification, and compliance cycle for the financial year.
As the EOFY approaches, it is the obligation of individuals, businesses, and investors to ensure their finances are streamlined to claim any tax deductions and avoid unnecessary penalties.
Key tasks that are involved in EOFY
- Tax reporting – Income tax returns are prepared, and tasks such as deductions review, calculation of tax liabilities, assessing capital gain or losses, and BAS and GST obligations are finalised.
- Financial reconciliation– Businesses review and reconcile bank accounts, payroll records, AR, AP, GST records, expense claims and investment transactions.
- Compliance reviews- Review of regulatory obligations, payroll compliance, SMSF obligations, and other reporting requirements is undertaken during the EOFY period.
- Strategic financial planning – During the EOFY period, the businesses will review profitability, plan budget forecasts and cash flow, and plan for the next financial year.
- Regulatory lodgements- The lodgments that include income tax returns, Business Activity Statements (BAS), PAY withholding reports, STP finalisation, FBT returns, and ASIC annual company statements.
Due to the increased workload, tighter deadlines, reconciliation demands, and compliance requirements, businesses are prone to errors during this period.
Common errors that can happen in EOFY
- Incorrect reconciliations
Missing transactions, duplicate entries, or timing differences can cause issues in reconciling bank accounts, credit cards, vendor/supplier balances, and payroll records.
- Missed or duplicate transactions
During the peak EOFY period, there will be a large influx of transactions, which may lead to neglected invoices, duplicate entries, or unrecorded adjustments.
- Payroll and superannuation mistakes
Wages, overtime, leave entitlements, PAYG withholding and Superannuation contributions are all a part of payroll and SMSF calculations. Any incorrect calculation can end in compliance issues and employee disputes.
- BAS and GST reporting errors
GST coding, unreported transactions, or incorrect lodgements can lead to inaccurate tax reporting.
- Misclassification of expenses
There are many categories in which expenses are categorised. When expenses are recorded incorrectly, it affects the financial statements, tax deductions, and future budgeting.
- Incomplete documentation
Tax deductions will help businesses save on taxes. But incomplete documentation due to missing receipts, invoices, and payroll records can cause audit issues and affect tax deductions.
- Missed deadlines or compliance obligations
Late lodgements, delays in reconciliations, or missed obligations in the constantly evolving regulatory environment can lead to penalties and compliance risks.
Altogether, the EOFY period can increase pressure on accounting firms to maintain accuracy in financial reporting and compliance processes. But with streamlined support, which can help firms in comprehensive compliance and tax services, the EOFY period can be navigated with confidence and hassle-free processes.
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